Liquidations take place if the health ratio drops below 250%, or if no repayment is made after the stake matures.
TLDR: $HEX1 is backed by T-shares, that are backed by HEX. The dollar value of HEX fluctuates, which means there is a chance the collateral value goes below the initially deposited value. If that happens, you are in risk of liquidation. Never let the health ratio go below 250%
T-shares are future HEX payments and they become harder and harder to mint, as time goes by as less HEX is available. Not only that, but T-Shares adjust to the number of participants, which means the more depositors, the harder it is to acquire a full T-share.
Hex One depositors are protected against liquidations before T-shares maturity. While T-shares cannot be sold before maturity, once they turn into HEX, there is a chance, while small, that liquidations take place. Beware of volatility.
Once the health ratio, or collateral ratio, goes below 250%, liquidations may be triggered for that position.
Once position's health ratio go below 250%, it means the collateral ratio has reached the accepted limit by the protocol, and moves to liquidations. In other words, someone can pay less than what the position is worth and become its owner.
The more the price of $HEX drops, the smaller the discount the liquidator gets. In other words, the sooner the debt position is repaid ($HEX1 tokens burned), the higher the discount for the liquidator.
Liquidations may also happen if the borrower does not repay his HEX1 debt after the stake matures and the 7-day grace period is due. In that case, positions go to liquidation and follow the same process described above.
Liquidations happen on a first-come-first-served basis.
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